The Ghana Real Estate Developers Association (GREDA) has blamed the widening housing deficit in the country on the inability of local financial institutions to provide structured and long-term financial facilities to players in the industry.
That, it said, had constrained most housing providers and real estate developers in the country, partly forcing them to perform below their individual capacities.
Given that the real estate business is a capital intensive one, the Executive Director of GREDA, Mr Samuel Amegayibor, said banks and other financial service providers in the country needed to devise long-term financial solutions that can be leveraged on by housing developers in their quest to deliver houses.
“But that is not what we are seeing. They (financial institutions) are interested in long-term financing; the type that can take about 10-15 years to mature yet that is what the construction industry needs,” Mr Amegayibor, who manages Rivonia Ghana Limited, said in an interview.
While admitting that the more than 1.7 million housing unit deficit in the country served as a business opportunity for players in the sector, Mr Amegayibor said issues such as financing ” have made it difficult for those of us in there to perform effectively.”
“I think the financial institutions are putting their energies in the wrong sectors by trying to invest in areas that bring quick returns. You know the real estate sector hardly depreciates; it always appreciates; so if you have banks investing in it, then they can be sure they won’t lose,” he added.
Banks not doing enough
GREDA, which is the umbrella body of real estate developers, housing providers and allied service providers, currently boosts of more than 400 members.
The association turned 25 last year (June) and a dinner dance and special awards night was held to celebrate its existence, as well as reward people and institutions that had contributed to the development of the housing sector in the country.
Among such institutions was the HFC Bank, one of the pioneering mortgage financiers in the country whose efforts have given birth to other mortgage providers such as Ghana Home Loans and Stanbic Bank Ghana Limited.
Although GREDA’s Executive Secretary admitted that the financial problem facing the real estate sector has eased over the years, he said it could have been better if the financial institutions had seen the challenges facing the sector as opportunities.
“I think the banks are just not doing enough. As we speak now, most of the mortgage companies have a tall list of orders that we (developers) are not able to meet and that comes back to the finance issue. What that means is, there is market for housing and if the banks support us to provide, then they will also get their monies back,” Mr Amegayibor added.
He also mentioned lack of infrastructure, especially water and electricity and access roads linking the various towns and cities to project sites, as well as land acquisition challenges as some of the problems deterring investors from the country’s burgeoning real estate sector.
He said although the provision of water and electricity was suppose to be the responsibility of the government, that had not been the case as many real estate developers personally link their project sites to areas where there was water and electricity.
The result, he said was the spiralling cost of housing in the country, which was to the detriment of the final consumers.
“Infrastructure and land use to account for about 25 per cent of our total cost but that has now gone up to 40 per cent partly because developers are now going outside the cities where social amenities are lacking,” GREDA’s Executive Directive said.
Despite the challenges in the real estate industry, foreign companies have not closed their eyes to the sector.
Majority of them keep coming in to invest in an area where locals have a firm grip on.
The latest is a Moroccan company, Addoha Group, which is planning to invest about 100 million euros into the provision of affordable housing in the country.
The company, which plans to construct about 5,000 housing units in the next few years, met with President John Mahama recently to disclose its intentions.
GREDA’s Executive Director said his outfit did not see that a surprise.
However, he said the offer made by the company would not be extremely different from those the local companies could provide.
“I really do not see much difference. The whole thing is about technology. If we ( the local developers) get the contracts, we can easily leverage on these technologies and deliver standard buildings but if government sees something special in the foreign companies and wants to use them much to the detriment of the local developer, then we can only watch,” Mr Amegayibor said.